Title

Authors

Publication Date

2016

Document Type

Article

Abstract

Nearly one-fourth of actively managed mutual funds hold ETFs, and when holding, take average positions of 12.31% of TNA. As a result, we provide the first examination of ETFs within mutual fund portfolios. We find that funds holding ETFs in smaller amounts manage cash better and have marginal market timing ability. In contrast, funds that hold larger ETF positions hold more cash, have poor market timing ability, and underperform by 2.14% per year risk-adjusted. Our results are consistent with a small allocation to ETF positions being associated with marginal benefits, while larger positions are associated with a lack of ability.